Islamic finance sets up liquidity management body

A global Islamic liquidity management corporation has been set up to issue sharia-compliant instruments to help Islamic banks manage their risks and encourage more cross-border investments, an industry body said.

A lack of liquidity tools is seen as one of the key challenges to the emerging Islamic finance industry, with sharia banks handicapped partly due to the limited range of products they can invest in.

The newly set up body “would provide liquid short-term sharia-compliant instruments that would promote further the competitiveness and resilience of institutions offering Islamic financial services globally,” the Islamic Financial Services Board said in a statement.

The board’s members signed a memorandum of participation for the liquidity management corporation on the sidelines of the IMF-World Bank meetings in Washington, it said.